This district’s Court of
Appeal has reversed a $750,000 damage award based on a former employee’s
slander claim against The Nethercutt Collection automobile museum in Sylmar.

Reversing the decision
of Los Angeles Superior Court Judge Susan Bryant-Deason, Div. Five ruled
Thursday that statements by Jack B. Nethercutt II and the museum that Michael
Regalia had demanded a commission to which he was not entitled, and was fired
because other employees had said they did not want to work for him, were not
slander per se.

Nethercutt’s father, J.
B. Nethercutt, founder of the Merle Norman Cosmetics Company, recruited Regalia
to work on his private automobile collection, known then as the Merle Norman
Classic Beauty Collection.

In 1995 the elder
Nethercutt established The Nethercutt Collection as a not-for-profit foundation
funded by his estate to operate an automobile museum with restoration
facilities. He appointed Regalia as president of the museum.

The Nethercutt
Collection museum features over 250 American and European automobiles dating
from 1898 to 1997, and also houses a research library and archival materials.

When J. B. Nethercutt
was hospitalized in August 2004, his son assumed control of the overall
operations of The Nethercutt Collection, subject to his father’s approval.

After his father died in
December 2004, J. B. Nethercutt II claimed Regalia had demanded a 10 percent
“finder’s fee” for his work acquiring a rare 1937 Talbot-Lago Type
150-C-SS/Sport Coupe for the museum. The car, one of only 14 in the world, had
an appraised value of $2.3 million.

Regalia testified that
he had merely requested a raise based on his role in obtaining the donation of
the car to the museum and his belief that he should be rewarded for having kept
the museum under budget every year he had served as president.

Nethercutt subsequently
terminated Regalia’s employment.

Various museum employees
testified that Nethercutt and his wife, a Nethercutt Collection board member,
told employees that Regalia had been fired because of his finder’s fee demand
and because employees had threatened to leave the museum if Regalia remained
employed there.

Betty Locke, the woman
who donated the Talbot-Lago to the museum, testified that Nethercutt had
reiterated those same reasons to her.

Regalia eventually filed
suit against the museum for wrongful termination in violation of public policy
and against both the museum and Nethercutt for slander

The jury rejected
Regalia’s wrongful termination claim, but found the museum and Nethercutt had
slandered Regalia. It found no actual noneconomic damages, but awarded Regalia
$750,000 for harm to his reputation.

The Civil Code defines
slander as an orally uttered false and unprivileged statement about a person
which accuses him of a crime, carrying an infectious disease, imputes to him impotence
or a lack of chastity, or directly injures him in respect to his profession or
business.

Writing for the
appellate court, Justice Richard M. Mosk explained that a statement meeting
these requirements is slander per se, and requires no proof of actual damages.
But, he added, slander that does not is slander per quod, and special damages
are required for any recovery.

Reasoning that a person
can make a claim for money that is rejected as unjustified without being viewed
as having committed an act that reflects negatively on him, Mosk opined that
the allegedly offending statements about Regalia did not directly injure
Regalia as an automotive professional or his new business, Regalia Concours
Restoration.

Similarly, Mosk noted
that a stated unwillingness of employees to work with a person, without more,
would not necessarily reflect poorly on that person because the desire to not
work together could be based on differences in work ethic or legitimate
business policies as opposed to some professional fault attributable to the
individual.

Although the alleged
statements about Regalia did not directly disparage him, Mosk acknowledged,
they could have actually damaged Regalia’s professional reputation and for that
reason should have been presented to the jury under a slander per quod theory,
with Regalia bearing the burden of proving that harm.

But because the jury
found Regalia had not suffered actual damages after he had a full and fair
opportunity to litigate that issue, he concluded, remand for retrial was
unnecessary, and the justice—joined by Justices Orville A. Armstrong and Sandy
R. Kriegler—directed the trial court to enter judgment in favor of Nethercutt
and the museum.